Governance of family firms and entry mode choice in foreign markets

Although the entry strategy in foreign markets has been widely investigated, the role of corporate governance remains surprisingly unexplored. This paper contributes to fill this gap, by studying how and when the main governance features and mechanisms in Family Firms influence their choice between establishing a foreign operation from scratch or buying an existing foreign entity. By relying on the socioemotional wealth (SEW) approach, we argue that non-family directors mitigate the families’ risk-aversion, and determine a different corporate equilibrium between the FF’s parties, resulting in higher recourse to acquisitions. We also tackle the gap in the understanding of how family specificities moderate the role of the board, and the latter’s influence on the company’s strategic choices. Namely, we claim that the presence of the founder, and the later generations do attenuate the influence of non-family directors. Our econometric analysis, run on 1,849 manufacturing initiatives undertaken abroad by 532 Italian FFs, in the period between 2000 and 2013, confirm our expectations.